Understanding MLM Systems and Pyramid Schemes

Whether someone has lost a job or is seeking to supplement a current position by working on the side, there are many reasons for individuals from all backgrounds to consider alternative means of earning money. To this end, some enterprising individuals may be drawn to a home business. Such prospects are wonderful opportunities, with flexible hours and unlimited earning potential. However, when starting a home business, it is important to be sure that it is a smart and legitimate opportunity.

Success with MLM Systems

For many people, starting a home business is easier with structure. Because of this, MLM systems are often popular options. MLM, which stands for multilevel marketing, refers to a specific business model that involves buying into an established system. After buying into this system, individuals would then have access to the product and would be licensed to sell the product to others. In this way, individuals who utilize MLM systems to earn money will pay an upfront fee to have access to the product, but those with business savvy and commitment will easily be able to recoup that fee by leveraging the product to others.

MLM systems have been around for many years, with a number of established brands that function on this method. Because of this, individuals can easily find an MLM system suited to their interests and hobbies. From makeup to kitchenware to car insurance, anyone can find an MLM system that will work for their lifestyle.

The Problem with Pyramid Scams

As profitable and established as some MLM systems may be, it can be difficult to discern which ones are actually legitimate. After all, there are a number of scams that mimic the set up of MLM systems. These less than savory systems are commonly known as pyramid schemes, and are illegal in most countries. The idea behind a pyramid scheme sounds very familiar to an MLM system: individuals have to buy into the system to gain access to the product, which they can then sell to others in order to earn money.

The key difference between a legitimate MLM system and a pyramid scheme is the risk differential. In a pyramid scheme, the upfront fee is often much more significant and cannot be easily recouped, even by a dedicated individual. This is because a pyramid scheme either has a less than satisfactory product or simply charges an exorbitant amount to buy in. The person who starts the scheme may easily recruit new individuals, enjoying the profits from the high buy in fee, while subsequent members have an increasingly difficult time hocking the overpriced or less than desirable product. As new recruits begin to dry up, the whole scheme collapses, leaving later recruits at a loss while the founders walk away with a hefty sum. This is why a pyramid scheme will often lack the longevity of established MLM systems.

MLM Systems and Pyramid Schemes: Understanding the Difference

For those who are interested in MLM systems, there are ways to distinguish viable systems from pyramid schemes. First, it is essential to look at the cost of joining in comparison to what is being gained. If the only way to recover the upfront investment is to recruit new people into the scheme, then it is likely that the system is illegitimate. Another giveaway in identifying a pyramid scheme is to look closely at the marketing campaign being pitched. If the majority of the attention is spent on how to secure new recruits, then chances are it is nothing more than a pyramid scheme. A true MLM system will focus much more on the perks and advantages of the product.

Overall, when looking into an MLM system, individuals should simply be vigilant and aware. A smart investor will always look at the long term profitability of the system, verifying the quality of the product and how established the company may be. A little research on the company or individual behind the system can be a smart choice. These extra steps may be somewhat time consuming, but can be a critical step to avoid getting ripped off. As long as individuals choose wisely, it is easy to make money on the side with an MLM system.

Source: http://www.maxusateam.com/business-opportunity/pyramid-schemes.html